Understanding The Italian Property Tax “Contributo di Costruzione”

Clarifying Italian Property Taxes

[Note: this article is one in a series about property tax in Italy. Refer to our main guide for an overview]

Expatax is dedicated to translating tax matters into a more understandable language for expats and retirees. "Contributo di Costruzione" - which we could roughly translate as "construction contribution" - is an (yet another) Italian property tax applicable in certain situations when a new building is built or an existing building changes its use. This tax can result in hefty, unexpected payments and is therefore best thought about well before your building or renovation project starts. These property taxes are best discussed as a whole. You may want to check our thorough guide on property taxes to see everything that building, owning and living in a property will cost you.

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The "Contributo di Costruzione" Goes Hand in Hand With The "Oneri di Urbanizzazione"

The Construction Contribution becomes payable when an existing building changes its purpose or when a new building is constructed. This payment is calculated based on the Urbanisation Charges ('oneri di urbanizzazione' - which we covered here) and construction costs and is made to the municipality.

• The payment for "oneri di urbanizzazione" is due at the time of the building permit being issued and can be made in instalments at the request of the party involved.
• The Construction Contribution linked with construction costs is calculated upon issuance and is payable within sixty days of the completion of the building.

Interpreting Urbanisation Charges

Urbanisation Charges are contributions towards the costs incurred by municipalities for the urbanisation of constructed areas such as roads, schools, and other infrastructures. These charges, updated every five years as per regional regulations, are based on your project's (estimated) construction costs.

• Primary Urbanisation Charges ("oneri di urbanizzazione primaria") contribute to residential roads, parking spaces, water networks, sewers, electrical and gas distribution networks, public lighting, equipped green zones, and telecommunications networks.
• Secondary Urbanisation Charges ("oneri di urbanizzazione secondaria") go towards facilities such as nurseries, primary and secondary schools, neighbourhood markets, religious establishments, neighbourhood sporting facilities, green areas, social centres, and cultural and health facilities.

Determining Construction Costs for New Buildings

Construction costs for new buildings are determined periodically by the regions, drawing reference from the maximum permissible costs for subsidised housing. The Construction Contribution encompasses a percentage of these costs, varying between 5% and 20%, guided by the regions depending on factors like location, destination, and construction type. Basically, if your construction costs amount to EUR 100,000 you can expect to add another EUR 5,000 to 20,000 on top as (yet another) tax.

Situations Where These Taxes May Be Reduced

In certain situations such as when building affordable housing, the amount of the Construction Contribution may be reduced to the Urbanisation Fee only. Given that these matters are governed at the town ("comune") level, you are better off discussing them well ahead of time with town hall. You can either discuss directly or make use of a geometra or an architect. In every case, in our experience, there is a surprising amount of latitude in actual negotiation with the town authorities - and therefore it is ever more important that you bring up your concerns about how much you'll end up paying in building contributions before you start building.

Instances of Contribution Exemptions

The Construction Contribution is generally exempted for:

• Agricultural zone interventions.
• Single-family building renovations and expansions.
• Renewable energy source installations and energy conservation.

For those constructions or facilities aimed industrial activities, such as workshops, a contribution is also necessary. This is calculated on the incidence of the urbanisation works and the required solid, liquid and gaseous waste treatment.

"Contributo di Costruzione" in Commercial and Tourism Businesses

For buildings or facilities designated for tourism - it is the case if you would like to run a professional hospitality business such as a hotel or a large B&B, depending on whether B&Bs are classed as commercial properties by your region, which rules in these matters autonomously from the central government - or commercial and directional activities, a contribution is required that equals the urbanisation works' incidence, plus an amount not exceeding 10% of the documented construction costs. Again, this is best discussed with town hall ahead of time, as you can well imagine that adding more than 10% to the costs of what is potentially an already-expensive project can really put a dent in your funds.

Sources

Contributi di costruzione - explainer from the Region Emilia-Romagna (as these taxes are a local matter, they differ by region and city, but this is a good general overview)